The Market Today

President Signs Executive Orders to Reduce Stimulus Cliff

by Craig Dismuke, Dudley Carter


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Monitoring the Stimulus Headlines

Quick Look at President Trump’s Executive Actions to Provide More Aid: President Trump signed executive actions on Saturday to provide stimulus to the U.S. economy after the White House and top Democrats failed to break the gridlock over legislation. The President plans to extend a smaller $400 weekly bonus to regular unemployment benefits through early December, with the Federal portion ($300) paid for by reallocated disaster relief funds and the remainder due from the states, potentially funded by monies previously provided through the CARES Act. The President instructed Federal agencies, such as Treasury, HUD, Freddie, Fannie, and the FHA; to take steps to avoid evicting tenants. After weeks of lobbying for Congress to take it up, President Trump told Treasury to defer, not cut, the 6.2% Social Security portion of the payroll tax from September through the end of the year. Finally, the President signed an action to extend a moratorium on federal student loan payments past September 30 through the end of the crisis.

Reduces Stimulus Cliff, Likely to Hasten Congressional Solution: The legality of the President’s executive orders are likely to be challenged.  However, the orders will help soften the stimulus cliff.  Moreover, this may well hasten a bipartisan stimulus agreement as Congress looks to put its own design on the efforts.  Bottom line: This removes some of the short-term risk and we continue to expect an additional stimulus package of between $1tn and $1.5tn.


Job Openings Expected to Remain Lower: This week’s relatively quiet economic calendar kicks off with just one economic report, the June JOLTs (Job Openings and Labor Turnover) report.  After peaking at 7.52mm in 2019, job openings are now down to 5.4mm and expected to decline further in the June data. Also on the calendar today, Chicago Fed Bank President Evans (non-voting dove) will speak on a Workforce Webinar.

President Trump’s Executive Actions on Aid Fail to Excite Markets: President Trump’s four executive orders from Saturday failed to energize U.S. equities or yields on Monday and foreign markets were subdued following the latest escalation of U.S.-China tensions. The President’s orders to provide more aid to Americans came after officials from the White House and top Democrats failed in recent weeks to break a gridlock over two partisan plans that varied significantly in size and scope. The actions also set off spirited debate about their legality and effectiveness and may have spurred negotiators to continue the search for a deal that can pass through Congress. Treasury Secretary Mnuchin said Sunday that he’s still “willing to listen” to proposals from Democrats and Speaker Pelosi said “of course there’s room for compromise.”

U.S.-China Tensions Continue to Compound Outlook Uncertainty: Amid the confusion over plans to provide an ailing U.S. economy more fiscal assistance, tensions between the U.S. and China continued to heat up. China announced unspecified sanctions Monday on 11 U.S. officials, including Senators Rubio, Cruz, and Cotton. The announcement from Beijing mirrors a similar step taken Friday by the U.S. against Chinese officials for their roles in curtailing democratic freedoms in Hong Kong and follows White House action to ban popular Chinese apps on national security grounds. Asian equities were mostly higher, including Chinese stocks which rose after an improvement in producer price deflation added to recovery hopes. Europe’s Stoxx 600 was up 0.3% at 7:30 a.m. CT. U.S. futures had inched into positive territory and Treasury yields remained lower after declining on China’s announcement. The 2-year yield was 0.6 bps lower at 0.123% with the 10-year yield down 1.0 bps to 0.554%.


ICYMI – August 7, 2020 Weekly Market Recap: Stocks rose last week as traditional economic data was generally better than expected and Treasury yields edged higher after falling to record-low levels as crucial negotiations for more stimulus stalled. While several non-traditional, high-frequency datasets have indicated the recovery slowed in July, both ISM surveys showed activity remained solid across both the manufacturing and services sectors. ADP’s employment report projected private payrolls recovered a disappointing 167k in July, a significant miss relative to the 1.2 million expected, but the official data from the BLS showed a 1.46 million gain for private payrolls, topping expectations of 1.2 million. Total payrolls were an even-stronger 1.76 million, helped out by a big increase in teachers, an expected distortion because of skewed seasonal adjustments caused by the pandemic. The strength led the unemployment rate to decline from 11.1% to 10.2%. While a positive to be sure, the trends slowed from June and 12.9 million jobs have yet to be recovered, signaling the long road back to full health for the labor market. That kept a sharp focus on negotiations in Washington for more stimulus, talks which remained at a stalemate on Friday. Click here to view the full recap.

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